EGoM likely to discuss payment structure for telecom M&A

The final M&A guidelines for the sector are likely to be announced after the EGoM meeting on November 22

The Empowered Group of Ministers (EGoM), headed by Finance minister P Chidambaram, is likely discuss the payment structure that telecom companies will need to follow in case of merger and acquisitions (M&A) in its next meeting on November 22. The final M&A guidelines for the sector are likely to be announced after the EGoM meeting on November 22.

According to the proposal, the telcos will have to pay the differential between entry fee and the market determined price of the spectrum in case of M&A, if the acquired company had bought spectrum paying an entry fee and not the market determined price, pro rata for the remaining period of the validity of the licence.

In case of M&A, telcos will not be required to pay the 5 per cent transfer charge that may be levied. It has been decided by the EGoM it one of its earlier meetings. Companies will be given an option to surrender spectrum beyond 4.4MHz (GSM) or 2.5MHz (CDMA), if they do not want to pay the charge.

The merged entity will be permitted to hold one block of 4.4MHz GSM spectrum or 2.5MHz CDMA spectrum, and the differential between the entry fee and the market determined price can be paid by either the acquirer or the acquired company, according to a recent communication.

The Telecom Commission has already approved the proposal to increase the market share cap to 50 per cent for the merged entity in each circle, from 35 per cent as proposed earlier in case of merger.

It has been decided in-principle to allow trading of spectrum, says the final draft.